Are Elon Musk's Ironman Goals For Tesla Stark-Raving Mad?

Mark Rogowsky
, ContributorI write about technology, trends and companies on the leading edge.Opinions expressed by Forbes Contributors are their own.

When Elon Musk gets compared to Tony Stark, the fictional magnate who becomes Ironman, it's because of his larger-than-life persona and penchant for making magical things happen through technology. Musk did it in 2008 with the first modern long-range electric car, Tesla's Roadster, and most recently by landing a rocket on a drone ship in the middle of the ocean. For even the most successful inventor-entrepreneurs, that would be a lifetime's work, not to mention plenty challenging. Yet Musk went and announced something yesterday that is quite likely going to prove an order of magnitude more difficult. His ability to pull it off may end up determining whether his work is mostly lost to history -- not unlike his company's namesake Nikola Tesla -- or whether he joins the pantheon of industrial giants like Ford and Carnegie.

The Power of 3: If Tesla can hit its more aggressive production targets, it will truly be a game changer . (AP Photo/Justin Pritchard)

Elon: The man and his dream

When Musk laid out his "master plan" a decade ago, he included the now famous step after the Model S:

Use that money to build an even more affordable car

The Model 3 is the "more affordable car" that Musk dreamed of back then but not even he forecast that 325,000 would be ordered in the first week it went on sale. Tesla had long been planning an ambitious trajectory of >50% increases in production each year to achieve a 500,000 vehicle annual output by 2020. With Model 3 due in late 2017, however, that would put next year's production somewhere around 150,000 -- far too low to even dent the backlog of reservations for the car. That's even more true when you consider that Tesla should be easily selling more than 100,000 of the Model S and X combined by next year.

The only way to satisfy the demand for Model 3 would be to build enough vehicles in 2018 to fulfill at least all the orders placed so far. And to do that, well, Tesla would need to hit its 2020 production goal two full years ahead of schedule. So Musk decided Tesla would do just that. In the shareholder letter accompanying yesterday's earnings announcement, the company admitted it would not be easy:

Increasing production fivefold over the next two years will be challenging and will likely require some additional capital, but this is our goal and we will be working hard to achieve it.

Challenge, accepted

To call that an understatement is, well, an understatement. In the same letter, Tesla reiterated that production in 2016 would be between 80,000 and 90,000 cars. It should be noted that in the company's history so far it has (1) tended to deliver on the low end of production forecasts and (2) never come remotely close to delivering a new product on schedule. But let's break down the task ahead of Tesla in terms of both those components.

The company claims it will exit the second quarter at 2,000 vehicles per week. In 2018, it will need to average close to 10,000 vehicles per week with roughly two weeks of plant closures over the course of the year. Given that 10,000 average, Tesla needs to increase production fivefold from the midpoint of 2016 to the midpoint of 2018. How hard is that? Well the company will more or less have doubled production between the middle of 2015 and 2016, going from 1,000 to 2,000 cars each week if this quarter's goal is achieved. To get to 10,000 in 2 years, all Tesla has to do is grow by 2.25x each of the next two years. That doesn't sound entirely impossible, right?

Of course, if you look at it in terms of units rather than proportion it's more daunting. Adding 1,000 vehicles is a week is one thing. Adding 2,500 per week next year and then 5,500 more in 2018 is quite another.